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Australian financial services exports to NZ up 60% in two years

February 16, 2015

Australian financial services exports to New Zealand grew by almost 60 per cent from 2011 to 2013 while traffic the other way was virtually stagnant, the latest statistics show.

A report published by Australian funds management and insurer industry body, the Financial Services Council (FSC), last December reveals the sector’s exports to New Zealand jumped from A$299 million in 2011 to A$359 million the following year before climbing to A$477 million in 2013.

By contrast, figures from New Zealand Statistics show financial and insurance services exports to Australia grew from NZ$80 million in 2011 to NZ$105 million the next year but fell back to NZ$95 million in 2013.

The FSC report, titled ‘State of the industry 2014’, says New Zealand is Australia’s “largest export destination for financial services and insurance and pension services”.

James Bond, FSC chief economist, said it was difficult to pinpoint any particular reason for the recent spike in financial services exports to New Zealand.

“I am not aware of any reason for strong growth in financial services exports to New Zealand other than that the Australian sector is experiencing strong growth in exports generally,” Bond said. “For example, [the FSC report] shows strong growth in exports to the UK and the US as well. The strong growth in exports generally reflects Australia’s comparative advantage in financial services.”

He said more detailed data would be required to show if the growth of KiwiSaver and the Mutual Recognition of Securities Offerings agreement (signed by Australia and NZ governments in 2006) could have boosted Australian financial exports across the Tasman.

The export figures represent fees earned from Australian financial products sold to New Zealand rather than repatriated company profits.

“The best way to conceptualise it is this: if a financial services company sells a product to someone outside Australia then the fees that are earned by that company are counted as an export,” Bond said. “For example, if a New Zealander invests in an Australian diversified fund, then the fees the Australian company earns for managing the money are exports.”

In a submission to the Australian Financial Services Inquiry (FSI) last August, the New Zealand Council of Financial Regulators (a joint body representing the Financial Markets Authority, the Reserve Bank, Treasury, and, the Ministry of Business Innovation and Employment), also highlighted Australia’s dominance of the local industry.

“For example, Australian banks hold around $360 billion of assets in New Zealand, equivalent to 85.8% of total New Zealand banking assets,” the submission says.

“Furthermore, Australian-owned companies also have significant market shares in the New Zealand insurance and fund management sectors, with for example, 68% of Kiwisaver funds and over 80% of the insurance sector managed by Australian-owned providers.”